As technology has evolved, it’s become easier for consumers and businesses to operate globally. Due to this, international payments are becoming increasingly common. Whether you want to transfer funds from the UK to a person or company based elsewhere or you’re travelling abroad and want to be able to make payments at your destination, having access to the right financial services can simplify the process.
In this article, we’ll examine the hazards to look out for when making payment abroad and explore the best and safest ways to make and receive international payments, so you’ll be able to make an informed choice about the right payment methods for you.
Is Making Payment Abroad Complicated?
Making payment abroad might seem relatively simple and straightforward but there are pitfalls to look out for, such as:
- Delayed transaction times
- High fees
- Reduced security
Some international payment options may take days to clear, which means the funds won’t appear in the recipient’s account straight away. If you’re doing business or waiting for goods and services, this delay can be inconvenient at best or catastrophic at worst.
Furthermore, the high fees that are associated with some types of international payment methods can make transferring funds abroad costly, particularly if you travel frequently or a doing business globally.
Of course, security is always a top priority when it comes to your finances, and making payment abroad can pose certain security risks, especially if you’re sending or receiving funds in regions that aren’t as highly regulated as the UK.
Now you know the issues that can arise when making payment abroad, you’ll be eager to discover what solutions are on offer.
Ways to Make Payment Abroad
Fortunately, there are many ways you can make secure international transfers, and choosing the right payment methods will even enable you to avoid high fees and delayed transaction times. To learn more, take a look at these four ways to make payments abroad:
Credit and Debit Cards
Credit and debit cards can typically be used all over the world, so they’re a viable way to make payments abroad.
If you’re travelling to another country, for example, it’s likely that your standard credit or debit card will be accepted, providing it’s been issued by a well-known company or institution. If you have a Mastercard credit or debit card, for example, you’ll be able to use it in more than 210 countries and territories around the world.
However, there are usually increased charges when you use a credit or debit card abroad, as well as the impact of currency conversion. Due to this, it’s not generally considered a cost-effective option if you’re making frequent payments abroad.
While paying by credit or debit card can be an option in person or online, these payment methods aren’t generally viable for sending international transfers from one account to another.
A Single Euro Payment Area (SEPA) transaction enables individuals or businesses in one European country to send funds across the border to recipients throughout the EU. Designed to simplify intra-Europe transactions, SEPA payments are overseen by the European Central Bank (ECB) and can be initiated by banks and financial institutions, like PayAlly.
Currently, SEPA payments can be sent and received across the 27 counties in the European Union, as well as the UK, Norway, Switzerland, Lichtenstein, Monaco, Andorra, Iceland, Vatican City, and San Marino.
As well as simplifying cross-border payments throughout Europe, SEPA offers a range of transaction options. This delivers enhanced flexibility and allows you to choose the most convenient and cost-effective method of transferring funds when you’re making a payment abroad. To date, the following SEPA payment methods are available:
- SEPA Credit Transfer
- SEPA Instant Credit Transfer
- SEPA Direct Debit Transfer
SEPA Instant Credit Transfers facilitate transactions almost in real-time and are available 24/7 but there is an upper limit of €100,000, while SEPA Credit Transfers usually take one day but have a higher limit of €999,999,999.99.
With the potential to send one-off payments in seconds or set up recurring payments via Direct Debit, the SEPA initiative provides you with a wide range of cost-effective options if you’re making a payment abroad within the participating countries.
Target2 is a real-time gross settlement (RTGS) system that is designed to facilitate transactions in Euros and enables cross-border payments to be made swiftly and easily. Although the system is run by the Eurosystem, other institutions can use the TARGET2 system via participating central banks.
Although Target2 offers real-time payments, it only processes transactions between 7 am – 6 pm CET and doesn’t operate on various public holidays, such as Christmas Day and New Year’s Day. Furthermore, Target2 is generally used for high-value payments. While it can be a viable option if you want to make a high-value payment abroad, it’s less commonly used than SEPA payments and other types of international transfers.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) essentially acts as a messaging system and allows participating banks and companies to send and receive transaction information.
Although funds aren’t actually transferred via the SWIFT system, it does send payment orders between accounts. When making a SWIFT payment (also known as a wire transfer), you’ll need the recipient’s details, such as their name and bank account number, but you’ll need a SWIFT code or Bank Identifier Code (BIC), which enables participating institutions to convey transaction details more quickly.
One advantage of using the SWIFT payment system is that it operates in more than 200 countries and has more than 11,000 participating institutions, so it can be a good option if you’re making payment abroad. However, it’s important to note that SWIFT fees can be relatively high and payments can take hours or days to clear, so it may not be suitable if you want to make a payment in real-time.
What’s the Best Method for Making Payment Abroad?
If you’re looking for the best way to make a payment abroad, you’ll need to consider various factors relating to the transaction, such as:
How quickly do the funds need to be received?
If time is of the essence, then you might prefer to use a real-time transfer option, such as SEPA Instant Credit Transfers or TARGET2 payments. If you want more flexibility in terms of when the funds need to be received, then a lower cost option, like Swift Credit Transfers or a SWIFT payment, might be needed.
How much are you sending?
Some systems, like TARGET2, are designed for high-value transactions, so it’s rarely worth using this payment method unless you’re sending a significant payment abroad. SEPA and SWIFT payments can be used for sending smaller amounts, but you’ll need to consider whether the cost of making the transaction is worthwhile, based on the amount you’re sending.
If you want to send €100 to a business abroad, for example, a €45 SWIFT payment charge may seem excessive, but a lower cost SEPA fee could be more cost-effective.
Where is the recipient situated?
Although SEPA payments are an increasingly popular way of making payment abroad, this is only a viable option if you’re sending or receiving money from within the 34 participating countries. If the recipient is situated elsewhere, then you may need to use an alternative option, such as SWIFT payments, which can be sent and received in more than 200 countries.
Is the payment one-off or recurring?
When you’re determining the best way to make a payment abroad, consider whether this will be a one-off transaction or if you’ll be making recurring payments. Although you can make frequent SEPA Credit Transfers and SEPA Instant Credit Transfers, paying by SEPA Direct Debit can be more cost-effective and convenient if you’ll be making recurring payments.
Similarly, SWIFT payments can be made regularly but the charges associated with these transactions can make them costly if you’re using them on a regular basis. Despite this, many institutions, like PayAlly, now offer competitive fees for SWIFT payments, which reduces your expenditure and makes it cost-effective to use this form of payment when you’re making payment abroad.
Is Making Payment Abroad Safe?
Making payment abroad is easier than ever and it’s safer than ever before too. SEPA, SWIFT, and TARGET2 are all well-established systems that facilitate billions of pounds worth of transactions. What’s more – they are all owned or managed by reputable organisations that implement advanced security protocols to keep your funds and your information secure.
Similarly, using a credit or debit card to make a payment abroad also offers a safe way to ensure funds are received by your creditor, providing your credit or debit card is issued by a well-known processing company, like Visa, Mastercard, Amex, etc.
What International Payment Method Is Right for You?
Although there are many options to choose from when it comes to making payment abroad, it isn’t always clear which is the best payment method. Fortunately, our relationship managers are on hand to provide you with the bespoke guidance you need. To find out more about making fast, secure local or international transfers, contact PayAlly today.